Microeconomics

(Table: Cherry Farm) Use Table: Cherry Farm. Suppose there are 100 farms in this industry with identical cost curves, as shown in the table. If all farms are the same size, how much economic profit will each farm earn when the industry is in long-run equilibrium?

$0

(Table: Costs of Producing Bagels) Use Table: Cost of Producing Bagels. The average total cost of producing 2 bagels is:

$0.20.

Suppose that the required reserve ratio is 10%. A bank has $300 in cash in its vault, $4,000 in loans to customers, $10,000 in checkable deposits, and $800 in deposits at the Federal Reserve. The bank's excess reserves are:

$100

A bank has $300 in cash in its vault, $4,000 in loans to customers, and $800 in deposits at the Federal Reserve. The bank's reserves are:

$1100

(Table: Cakes) Use Table: Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases 1, 2, or 3 mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases 1 mixer and bakes 200 cakes per day, what is her average total cost?

$15

(Figure and Table: Variable, Fixed, and Total Costs) Use Figure and Table: Variable, Fixed, and Total Costs. The marginal cost of increasing production from 51 to 64 bushels of wheat is:

$15.38

(Figure: Short-Run Costs II) Use Figure: Short-Run Costs II. At 6 units of output, average total cost is approximately:

$170.

Sasha buys a cold soda and a slice of pizza. The marginal utility from a soda is 40, and the price of the soda is $1. The marginal utility from a slice of pizza is 80. Assume Sasha is successfully maximizing his utility. If this is the case, we know the price of a slice of pizza must be:

$2

The table shows Sam's cost of producing and selling baskets of apples in a perfectly competitive market at the local farmers' market. If the apples sell for $7 per basket, Sam's profit per basket is:

$2.33.

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is:

$200

Assuming that capital is the fixed input, there are two machines used in the design and production of the shirts, and capital costs $30 per day. The cost of labor is $25 per worker per day. The daily variable cost of producing four T-shirts is:

$25

The reserve ratio is 20% for the banking system below. If the Federal Reserve sells $50,000 of Treasury bills to the banking system, then the money supply will decrease by $_____

$250,000

The graph shows Dan's costs for truckloads of firewood. Dan sells his firewood in a competitive market. At a price of $140 per load, the total cost at Dan's profit-maximizing output is:

$400.

(Table: Cost Data) Use Table: Cost Data. The average total cost of producing 5 purses is:

$48.

A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $35 in average total cost. The total fixed cost of producing 10 pairs of eyeglasses is:

$50.

Erica deposits $5,000 in cash in Big Bank, and the reserve ratio is 10%. The required reserves are $_____.

$500

(Figure: Total Cost for Tomato Producers) Use Figure: Total Cost for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $14. The farmer's total cost at the profit-maximizing number of bushels is:

$56.00

The table shows the costs of washing cars at David's Car Wash. The average fixed cost of washing 5 cars is $_____.

$6

The table shows Sam's cost of producing and selling baskets of apples at the local farmers' market, in a perfectly competitive market. If the market comprises 100 apple farmers, which of the following points is on the industry short-run supply curve? Please choose the correct answer from the following choices, and then select the submit answer button.

$7 and 900 baskets

If Beth's utility from eating one slice of pizza is 30; two slices, 40; and three slices, 30, Beth's marginal utility from the third slice is:

-10

In a simple banking system, where banks hold no excess reserves and all funds are kept as bank deposits, then a $_____ increase in excess reserves will increase deposits by an amount equal to 1 divided by the required reserve ratio.

1

Jordan has $16 to spend on entertainment this week. It costs $4 to go to a movie and $2 to rent a video. Which of the following consumption bundles will be on Jordan's budget line?

1 movie and 6 videos

According to this T-account, and assuming the bank holds no excess reserves, the required reserve ratio is _____%. AssetsLiabilitiesRequired Reserves$100Checkable Deposits$1000Loans$400Treasury bills$800

10

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The horizontal intercept for Faruq's budget line is _____ tacos.

10

If Beth's utility from eating one slice of pizza is 30; two slices, 40; and three slices, 30, Beth's marginal utility from the second slice is:

10

The table shows the total utility that Amy gets from drinking coffee. Amy's marginal utility from the fourth cup of coffee is _____ utils.

10

Suppose that the required reserve ratio initially is 10% of bank deposits, and is then increased by the Federal Reserve to 20% of bank deposits. This will change the value of the money multiplier from:

10 to 5.

The table shows a production function for game-day T-shirts. Assume that the fixed input, capital, is two machines used in the design and production of the shirts and costs $30 per day. The cost of labor is $25 per worker per day. The daily variable cost of producing 15 shirts is _____ dollars.

100

The table shows a production function for game-day T-shirts. Assume that capital is the fixed input, there are two machines used in the design and production of the shirts, and capital costs $30 per day. The cost of labor is $25 per worker per day. The daily total cost of producing 13 shirts is _____ dollars.

105

The Federal Reserve consists of _____ regional Federal Reserve Banks.

12

The table shows marginal and total utilities for various quantities of exercise for Mike. Mike's total utility of two hours of exercise is:

13

(Table: Marginal Utility per Dollar II) Use Table: Marginal Utility per Dollar II. If Manuel has $18 to spend on potatoes and clams, then the utility-maximizing combination is _____ pound(s) of clams and _____ pound(s) of potatoes.

1; 6

The table shows the total utility that Shanka derives from iPod shuffles and Birkenstocks. The price of the iPod shuffle is $50, and the price of the Birkenstocks is $100. Shanka's income is $300. Shanka will have spent all of her income if she buys _____ iPod shuffle(s) and two pairs of Birkenstocks.

2

Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The price of a book is $5 and the price of a pencil is $0.50. Which bundle of books and pencils is NOT affordable for Adam?

2 books and 30 pencils

(Table: Total Product and Marginal Product) Use Table: Total Product and Marginal Product. The marginal product of the second worker is _____ units per period.

20

The table shows the costs of washing cars at David's Car Wash. The average variable cost of washing 5 cars is $_____.

20

If the reserve ratio is 10% and Victoria's deposit increases required reserves by $2,000, then Victoria's deposit was $_____.

20,000

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively. The total utility for the first unit is:

200

The table shows marginal and total utilities for various quantities of exercise for Mike. Mike's total utility of 4 hours of exercise is:

22

If five workers at Taco Bell can make 240 tacos in an hour and the marginal product of the sixth worker is 30, the total product of six workers is _____ tacos.

270

The table shows marginal and total utilities for various quantities of exercise for Mike. Mike's marginal utility of the fifth hour of exercise is _____ utils.

3

Given the graph, if the monopolist perfectly price discriminates, monopoly profit will be $_____.

32

The table shows a production function and total costs for game-day T-shirts. Suppose that capital is the fixed input, there are two machines used in the design and production of the shirts, and capital costs $30 per day. The cost of labor is $25 per worker per day. Rounding to two decimal places, the daily marginal cost of the tenth T-shirt is $_____.

4.17

The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $10 to spend on both goods. The maximum number of bags of peanuts that you can purchase is:

40

If four workers at Taco Bell can make 200 tacos in an hour and five workers can make 240 tacos in an hour, then the marginal product of the fifth worker is:

40 Tacos

(Table: Optimal Choice of Milk and Honey) Use Table: Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. If he spends all of his income on honey, the most he can buy is _____ jars, and his total utility will be _____.

4; 152

The graph shows Dan's costs for truckloads of firewood. Dan sells his firewood in a competitive market. At a price of $140 per load, Dan's profit-maximizing output is _____ loads.

5

The table shows marginal and total utilities for various quantities of exercise for Mike. Mike's marginal utility of the third hour of exercise is:

5

(Scenario: Tom's Budget Constraint) Use Scenario: Tom's Budget Constraint. The combination of _____ music downloads and _____ movies lies ON Tom's budget line. Scenario: Tom's Budget Constraint Tom is trying to decide how to allocate his $50 budget for music downloads and online movie streaming when the price of a music download is $1 and the price of a movie is $5.

50; 0

Amy has $12 to spend on food. Tacos cost $2 each and pizzas cost $6 each. If she spends all of her money on tacos, she can buy _____ tacos

6

If James lowers his price from $7 to $6, the quantity effect is $_____.

6

The graph shows different combinations of sun tan lotion and cowboy hats that Fred can buy. If Fred's income is $24, the price of suntan lotion is $_____.

6

The table shows the demand, marginal revenue, and cost schedules for barrels of spring water sold by James, a monopolist. James's maximum profit is $_____. Include two decimal places in your answer

7.02

The table shows cost and revenue information for Noelle's trees. The marginal cost of the thirtieth tree is _____ dollars.

8

(Table: Production of Bagels) Use Table: Production of Bagels. The marginal product of the fifth worker is _____ bagels.

9,000

(Figure: Marginal Product of Labor) Use Figure: The Marginal Product of Labor. The total product of labor for eight workers is _____ bushel

96

Which of the following is the best example of a firm adding a fixed input?

A furniture manufacturer builds a new factory.

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Selena's Gourmet Salsas. Which points are on the long-run average total cost curve?

A, C, and X

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Selena's Gourmet Salsas. If Selena's Gourmet Salsas plans to produce nine cases of salsa, it should choose:

ATC 9

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Selena's Gourmet Salsas. If Selena's Gourmet Salsas plans to produce three cases of salsa, it should choose:

ATC3.

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Selena's Gourmet Salsas. If Selena's Gourmet Salsas plans to produce six cases of salsa, it should choose:

ATC6

(Figure: The Profit-Maximizing Firm in the Short Run) Use Figure: The Profit-Maximizing Firm. O is the _____ curve.

AVC

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Game Day Shirts. If Game Day Shirts builds the plant represented by ATC2 and produces 2,000 shirts, its average total cost will be represented by point:

B

Which is true regarding assets and liabilities?

Ben's mortgage is a liability for Ben.

Which scenario is MOST likely to cause firms to exit a perfectly competitive industry?

Consumer income falls.

_____ would be a good asset to serve as money because they would be a good store of value.

Diamonds

True or False: According to the principle of diminishing marginal utility, as more of a product is consumed, its total utility decreases. This is _____.

False

True or False: Gene has a lawn-mowing business. If Gene's marginal cost is $20, average total cost is $18, average variable cost is $12, and the price is $15, he should mow more lawns. This is _____.

False

True or False: The marginal utility per dollar spent on a good is the marginal utility of the last unit consumed multiplied by the price of the good. This is _____.

False

An advantage of _____ money is that it does not tie up any real resources.

Fiat

A budget constraint requires that the cost of a consumer's consumption bundle be no more than the consumer's:

Income

The table shows a production function for game-day T-shirts. When 15 T-shirts are produced, marginal cost is:

Increasing

(Figure: A Perfectly Competitive Firm in the Short Run) Use Figure: A Perfectly Competitive Firm in the Short Run. The minimum price that the firm must receive to produce in the short run is:

P.

Which statement illustrates the use of money as a medium of exchange?

The building contractor said the new roof for the house would cost $6,000.

Which illustrates the double coincidence of wants?

The plumber needs a lamp rewired, and the electrician has a toilet that is not working.

Which of the following would be considered a perfectly competitive industry?

The soybean industry in which the product is uniform and there are many buyers and sellers.

If the price is below average total cost, then in the short run a perfectly competitive firm should:

There is not enough information given to answer this question.

When perfect competition prevails, which characteristic of firms are we likely to observe?

They are all price takers.

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Selena's Gourmet Salsas. True or False: If the firm plans to produce nine cases of salsa, it should choose the plant size corresponding to ATC6. This is _____.

True

The table shows Sam's cost of producing and selling baskets of apples at the local farmers' market, in a perfectly competitive market. True or False: In the long run, if the price is $4 per basket, vendors will exit the industry until economic losses are zero. This is ___

True

The table shows a production function and total costs for game-day T-shirts. Suppose that capital is the fixed input, there are two machines used in the design and production of the shirts, and capital costs $30 per day. The cost of labor is $25 per worker per day. True or False: The daily marginal cost of the sixteenth T-shirt is $25. This is _____.

True

True or False: If the good accounts for a substantial share of a consumer's budget, the substitution and income effects are both important in explaining the consumer's response to a price change. This is _____.

True

True or False: The wheat growing industry is a perfectly competitive industry because it produces a standardized product and each farmer has a very small market share. This is _____.

True

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Game Day Shirts. If Game Day Shirts builds the plant represented by ATC2 and produces 9,000 shirts, its average total cost will be represented by point:

Y

The marginal utility per dollar spent on a good is the:

additional utility gained by spending one more dollar on that good or service.

The monetary aggregate M1 includes currency in circulation:

and any asset that can easily be used to purchase goods and services, like checkable bank deposits and traveler's checks.

Banks, in general:

are financial intermediaries that use liquid assets, deposits, to finance illiquid investments of borrowers.

Dollar bills in bank vaults _____ the money supply.

are not part of

A perfectly competitive industry is said to be efficient because the:

average total cost of production of the industry's output is minimized in the long run.

Which of the following is the mathematical definition for the marginal cost curve?

change in total cost / change in quantity

An increase in a consumer's income will NOT:

change the slope of the budget line

Silver certificates are a certificate of ownership that silver owners hold instead of storing the actual silver. This is an example of:

commodity-backed money.

If a good is subject to diminishing marginal utility, as more of the good is consumed, the marginal utility per dollar will:

decrease

Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.

decreases; increases

In the short run, the average total cost curve slopes upward because of:

diminishing returns.

At high levels of output, the ________ effect dominates the ________ effect and the average total cost curve slopes ________.

diminishing returns; spreading; upward

The table shows a production function for game-day T-shirts. Capital is the fixed input and there are two machines used in the design and production of the shirts. The marginal product curve for this production process would be:

downward sloping.

The table shows Sam's cost of producing and selling baskets of apples in a perfectly competitive market at the local farmers' market. In the long run, if the price is $4 per basket, firms will:

exit the industry.

If firms are taking economic losses in the short run, then in the long run, firms will leave the industry, industry output will _____, and economic losses will _____.

fall; decrease

When marginal cost is BELOW average variable cost, average variable cost must be:

falling.

he graph shows the long-run average cost and short-run average costs of three different plant sizes for Game Day Shirts. True or False: Regardless of its production quantity, the firm can minimize average total cost by selecting a level fixed cost represented by ATC2. This is _____.

false

When banks borrow from one another, the rate of interest that they pay for this loan is called the _____ rate.

federal funds

Money in Charlotte's checking account is:

fiat money.

The table shows the total utility that Frieda gets from drinking hot chocolate. Frieda's total utility is maximized at the _____ cup.

fifth

The long-run average total cost curve shows the relationship between output and the average total cost when the plant size has been chosen to minimize _____ for each level of output

fixed

Once diminishing returns have set in, as output increases, the total cost curve:

gets steeper.

The principle of diminishing marginal utility says as more of a:

good is consumed; each unit adds less to total utility than the previous unit.

One disadvantage of fiat money is that:

governments can create money whenever they feel like it, and may be tempted to abuse the privilege.

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:

greater than average total cost.

If total utility is rising as more salsa is consumed, we can definitely say that marginal utility is:

greater than zero.

To say that you can't have too much of a good thing means that, for any good that you enjoy (for example, pizza):

higher consumption will always lead to higher utility.

On a sparsely populated island, an additional minute of high-speed Internet service would have a _____ marginal utility than in New York City, while in New York City, quiet evenings would carry a _____ marginal utility than on a deserted island.

higher; higher

If a perfectly competitive firm is producing a quantity where P > MC, then the firm can increase profit by:

increasing production

If your firm is operating in the negatively sloped portion of a long-run average total cost curve, then your production exhibits:

increasing returns to scale.

In the long run, a price in excess of the break-even price will:

lead to the entry of new firms in the industry.

Banks are financial intermediaries that use _____ assets to finance _____ investments of borrowers.

liquid; illiquid

The table shows cost and revenue information for Noelle's trees. At thirty trees:

marginal revenue exceeds marginal cost.

A fast-food restaurant accepts five dollars in cash as payment for three tacos. This is an example of money's role as a:

medium of exchange.

Liz spends all her income and consumes three ice cream cones and two milkshakes per week. The marginal utility per dollar of the ice cream cones is 12 and the marginal utility per dollar of milkshakes is 9. In order to maximize utility, Liz should consume:

more ice cream cones and fewer milkshakes.

Bank runs can "break a bank" because:

most of the bank's assets are illiquid loans that must be sold at a loss in order to provide cash to pay depositors.

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

produce at an economic loss.

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers:

purchase more of the now less expensive good

If, because of a price change, both the income and substitution effects are strong for a normal good, this segment of the demand curve must be:

relatively price-elastic

The three primary policy tools available to the Federal Reserve include:

reserve requirements, the discount rate, and open-market operations.

When an existing firm exits a perfectly competitive industry, the selling price:

rises and each remaining firm produces more.

The graph shows different combinations of sun tan lotion and cowboy hats that Fred can buy. If Fred's income increases, the budget line will:

shift out to the right.

(Table: The Utility of Macaroni and Cheese) Use Table: The Utility of Macaroni and Cheese. Carmen loves eating macaroni and cheese on Thanksgiving. Carmen's marginal utility from eating macaroni becomes negative at the _____ serving

sixth

In the simple banking model presented in the text, the _____ the money multiplier, the _____ will be the numeric value of the required reserve ratio.

smaller; larger

The graph shows cost curves for a company that manufactures jalapeño peanut butter. The reason for the slope of Part A on the short-run marginal cost curve is:

specialization.

If the price of coffee cups falls and the consumer decides to buy more coffee cups solely because they are less expensive, this describes the:

substitution effect

The perfectly competitive model does NOT assume:

that firms attempt to maximize their total revenue.

You own a deli. Which input of production is MOST likely fixed at your deli?

the dining room

Perfect competition is characterized by:

the inability of any one firm to influence price

Which value BEST describes the amount of utility that is gained by spending an additional dollar on yogurt?

the marginal utility of one tub of yogurt divided by the price of the yogurt tub

Antonio derives more utility from spending an additional dollar on boots than on gloves. We can assume that

the marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on gloves.

What accounts for the flattening of the total product curve as it goes to the right?

the principle of diminishing returns to an input

What is measured along the vertical axis of a production function?

the quantity of output produced

If an individual deposits currency into a bank, then:

this deposit will eventually raise the money supply.

The total cost curve shows how _____ cost depends on the quantity of _____.

total; output

With a large number of workers and high quantity of output, employing additional workers results in diminishing returns and causes the marginal cost curve to slope

upward

The total product curve:

will become flatter as output increases if there are diminishing returns to the variable input.

Buford Bus Manufacturing installs a new assembly line. As a result, the output per worker increases. The marginal cost of output at Buford:

will decrease (the MC curve will shift down).

The graph shows the long-run average cost and short-run average costs of three different plant sizes for Game Day Shirts. Game Day Shirts experiences economies of scale at output levels ranging from _____ shirts to _____ shirts.

zero; 4,000